Banks boost Europe stocks ahead of Greek debt swap

ADP jobs report from the U.S. supports markets

An earlier version of the story misstated the recent performance of Spanish stocks. The story has been corrected.

LONDON (MarketWatch) — European stock markets edged higher Wednesday in choppy action, aided by gains for banks, with investors remaining cautious ahead of a looming deadline for Greece’s debt swap deal. A U.S. private-sector payrolls report also supported markets.

The Stoxx Europe 600 index (SXXP) added 0.6% to close at 260.10, after sinking 2.7% on Tuesday.

“It was a pretty extreme sell off yesterday. Today we don’t see a lot of volume and until we see a resolution to the Greek debt deal, we will not see too much commitment to buy stocks,” said Colin McLean, managing director at SVM Asset Management.

Posting one of the biggest gains in the index, Cobham PLC (COB) surged 12.6% as it reported a 23.8% rise in profit for 2011.

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Fiat made its mark at the Geneva Motor show with its new 500 L family car. It was one of the highlights of the show at least for middle-market autos. Dow Jones's Matthew Curtin has been covering the show. Photo: Getty

Also in London, Admiral Group PLC (ADM) jumped 10%, after its 2011 pretax profit beat analyst estimates and the auto insurer said it can continue to “grow profitably.”

Also lending support in London, HSBC Holdings PLC (HSBA)
HBC, +0.08%
rose 0.4% as it agreed to sell its general insurance businesses in Asia and Latin America.

The broader banking sector led the upbeat trend on European bourses as investors waited to see how many of Greece’s private creditors will participate in a bond swap deal by Thursday evening’s deadline in Athens.

The Institute of International Finance said the 30 members of the Private Creditor-Investor Committee that have agreed to participate hold a total of 39.3% of the 206 billion euros ($270 billion) of eligible paper. Read about Greek debt swap

“The market moves higher on anticipation that more people will sign up for the deal. But there is still a risk that the collective action clauses will be triggered,” said Stephen Pope, managing partner at Spotlight Ideas.

Use of the collective action clauses would force all private bondholders to participate in the swap and could trigger payouts on credit default swaps, derivative instruments used to insure against nonpayment, analysts said.

European stocks edged higher in afternoon trade as an ADP employment report showed U.S. private-sector payrolls increased 216,000 in February, compared to a 173,000 rise in January. Markets look to the survey to provide an indicator on the nonfarm payroll report, which will be released Friday. Read about private-sector payrolls

Weighing on the index, Total SA (FP)
TOT, +0.18%
declined 0.3%. The oil group’s head of refining and chemicals, Patrick Pouyanne, reportedly said at a conference on Tuesday that an upgrade of a Texas refinery, Port Arthur, wasn't as profitable as expected.

Banks also buoyed the German DAX 30 index (DAX), which added 0.6% to 6,671.11, after seesawing between positive and negative territory in early trade. Commerzbank AG (CBK) rose 4.2% while Deutsche Bank AG (DBK) advanced 2%.

Car makers also added to the positive sentiment as BMW AG (BMW), up 1.9%, said it increased sales 14% on the year in February, boosted by strong demand in China and the U.S. Daimler AG (DAI) rose 1.1%.

Among the biggest decliners in the index, Adidas AG (ADS), lost 3% after more than doubling profit in 2011, but missing analyst estimates.

RWE AG (RWE) was also down in Frankfurt, off 0.4%, after UBS downgraded the stock to neutral from buy and HSBC downgraded it to underweight from neutral.

Also down in Europe, Spain’s IBEX 35 index (IBEX) shed 0.1% to 8,161.80. The Spanish government Tuesday night said the country’s regions were committed to meeting new budget-cutting targets.

Yields on 10-year Spanish government bonds (10YR_ESP) were 4 basis points lower at 5.09%, but had moved above 5.2% earlier in the day. Yields move inversely to prices and a basis point is 1/100 of a percentage point.

“Spanish stocks have overperformed recently and now we’re seeing a correction toward the rest of Europe. Investors are also taking into consideration the impact Greece has had on peripheral countries,” said David Gualtieri, director of equity sales at Intermoney Valores SV in Madrid. “Spain’s risk is high compared to other countries.”

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